Acquisitions Reshape the Marketing Automation Industry: Growth at the Bottom, Room in the Middle, Fog at the Top

Raab Associates officially released the new edition of our B2B Marketing Automation Vendor Selection Tool (VEST) yesterday. This is our flagship report on the industry, with nearly 200 data points on 23 vendors and separate ratings for micro-business, small to mid-size companies, and enterprise marketing departments. There are quite a few vendor comparisons out there, but none come close to the level of detail in the VEST – and details are what you really need to select a system. I personally suggest that anyone interested in the industry buy a copy for themselves and another for someone they love. See www.raabguide.com/vest for details.

I genuinely enjoy catching up with the vendors while preparing the VEST, but must admit that my favorite part of the process is analyzing the data once it’s assembled. Sadly, the wave of acquisitions that swept the industry in the past year has made this harder: many major vendors are now part of a public company, which severely restricts the information they can share. We’ve probably passed a tipping point where so much information is hidden that I can’t draw a clear picture of industry growth rates or competitive positions.

The table below shows the data available and highlights the holes. I’ve grouped the vendors into three buckets based on the market sectors they serve: micro-business (under $5 million revenue), small to mid-size business ($5 to $500 million), and large enterprises (over $500 million).

You’ll immediately see that the “not reported” information is concentrated among companies serving mid-size and enterprise clients, which is where all the acquisitions to date have taken place. Neolane is an exception but only because they provided the VEST information just before Adobe acquired them in June. I doubt we’ll see new numbers from them in the future. Marketo was mostly missing until they provided key figures in their earnings call this afternoon. Thanks, guys.

I've summarize my thoughts on this data with three oh-so-catchy phrases: growth at the bottom, opportunity in the middle, and fog at the top.

Growth at the Bottom: the green shading in the client growth column highlights companies reporting a year-on-year increase of 60% or more. What jumps out is the concentration at the top of the chart, in the micro-business sector. Four of the five micro-business vendors grew more than 60% and the fifth (Venntive) grew at a far-from-shabby 54%. There’s too much missing data in the other sectors to say for certain that the micro-business vendors are growing the fastest, but it sure looks that way. My interpretation is that the micro-business sector is the least mature and still presents the greatest untapped opportunity – even if buyers are still limited to the small proportion of business owners who are “tech geeks”.

Room in the Middle: Marketo's client count increased just 36% from mid-2012 to mid-2013 (although they’re projecting 54% revenue growth for 2013 vs. 2012).  We can no longer see the growth rates for mid-market heavy weights Pardot and Eloqua, but I’d be surprised if they beat Marketo.  They're certainly not close to the 67% to 90% rates reported by LeadFormix, Act-On, and eTrigue. I suspect Pardot, Eloqua and Marketo will increasingly focus on selling to enterprises, and in Marketo’s case on expanding footprint within existing clients. If so, this might open the way to faster growth by the next tier of mid-market vendors, who are mostly still private.  (LeadFormix is the exception, but seems to be pretty much left alone by its corporate parent). The clear winner in this scenario is Act-On, which has ample venture funding and has indeed been growing very rapidly. They are already the first vendor since Pardot to break the 150-employee barrier (blue shading). Silverpop and HubSpot might also benefit but neither is fully focused on standard B2B marketing automation. Other vendors would need outside funding to squeeze through what will probably be a briefly open window.

Fog at the Top: My visibility into enterprise B2B marketing automation was always clouded because of cross-over by B2C vendors including IBM, SAS, Teradata, and Neolane. It is now completely obscured except for sporadic glimpses of details that vendors choose to reveal. But even if everyone shared all their data with me, the enterprise picture would remain foggy because enterprises are increasingly integrating marketing automation with advertising , sales, service, and Web management. This makes it increasingly meaningless to treat marketing automation as a distinct category. Of course, that integration is exactly why the enterprise vendors purchased all those marketing automation systems in the first place.

If integration really happens at the top then we'll end up with a bizarre symmetry, since the enterprise market will be mirroring the integrated sales / CRM / Web / ecommerce products already bought by micro-businesses.  This would leave stand-alone marketing automation as a niche product for mid-tier companies. It would be a very large niche, but squeezed between broader suites from above and below and, eventually, challenged from within by integrated suites built for mid-market companies. The obvious response from marketing automation vendors is to build those broad suites themselves or to create platforms that are the foundation of such suites. That’s exactly what the larger mid-tier companies are doing, but it’s an expensive proposition. Any small mid-market companies who want to play must grab whatever fleeting opportunity the market offers today for growth, before they are locked out for good.

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Customer Data Platforms: My New Whitepaper Explains the Excitement

You may have noticed that I've been uncharacteristically aggressive in promoting the Customer Data Platform concept.  Sorry, but I just can't help it: a new system category is even more rare than a new B2C marketing automation system (which, as yesterday's post pointed out, is much rarer than a new beetle).  More important, I think the category itself is a very important development that could really help marketers solve some big problems.  So it's worth several shoves to get the ball rolling.

Along those lines, I am embarrassingly excited to report my formal whitepaper explaining the CDP in depth has just been published.  It was sponsored by ReachForce but they had no influence on the actual content. (In fact, they probably would have preferred something a bit more on-message for their own marketing, so let me thank them for their indulgence.)  You can download it here.  Comments are welcome!

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Provenir Adds Social Listening to Customer Decisions: Another Customer Data Platform

I’m still collecting examples to illustrate my new category of Customer Data Platform (CDP) systems. The latest is Provenir, a company founded in 1992 that has long sold a system to make credit risk and fraud decisions in real time. Over the past year, the company has added “social listening” capabilities and begun offering itself to marketing agencies as a customer interaction manager. It has met with good success and is now offering its “social listening platform” more broadly. *


It’s a slight stretch to call Provenir a CDP, because it doesn’t manage a permanent customer database.  Rather, like most interaction managers, it calls data from external sources during each decision.  But Provenir does have some customer matching capabilities and stores at least some information internally. Moreover, it completely meets the other three CDP criteria: predictive modeling, real-time decisions/recommendations executed through external systems, and a non-technical user interface. It’s also sold as the “glue” connecting data sources, modeling, and execution systems, which is exactly the role played by a CDP.  So, what the heck…welcome to the club!

Provenir is organized around process flows, which cover a particular task such as reacting to a Web site visit. Users define each process by building a flow chart, or, as the cool kids call them today, a graph.** These, um, graphs***, can contain branches, loops, and other advanced structures.  The nodes can also contain other graphs that define a subprocess in more detail. Nodes can perform a wide range of operations including data gathering, calculations, updates, decisions, and messages to external systems. Although setting these up is inevitably rigorous, Provenir makes it as painless as possible by providing help such as letting users draw lines to map fields from one system to another; building rules through score cards, tables and decision trees; and warning if a flow is incomplete.

Provenir relies on external systems to assemble, integrate, and store customer data.  Users can build matching processes with system graphs, although the vendor recommends connecting to other products to load reference data or do advanced "fuzzy" matching.  Provenir can monitor source systems for selected events and issue queries to assemble data as needed. The social listening features can monitor Twitter for keywords and Tweets by specified individuals.  These can trigger process flows that can retweet a message, send a direct Twitter message to the poster, or respond through another channel. The system can also monitor and post messages on Facebook. Other channels will be added over time.

Predictive modeling in Provenir is also done in external systems. The system can import PMML code or call models in SAS, R, or even Excel. Data mapping functions can automatically extract the list of required variables from PMML, do basic transformations and calculations when loading model inputs, and manage parameters, constants, and local variables.

Decisioning is Provenir’s greatest strength. The process flow…I mean graph…is inherently very flexible, and the ability to define rules as tables, trees, score cards, and other formats adds even more power. Users can set up champion/challenger tests as splits within a process flow; results are stored in a database for analysis and reporting. Users can also build simulated data sets, containing specified distributions of particular variables, and use these to forecast results of their flow designs. Such simulation is one mark of a mature decision system.

Provenir has some built-in messaging capabilities, but most decisions are executed externally.  The system has been connected with email, Web content management, call centers, campaign management, text messaging, and other execution platforms.

Pricing for Provenir’s social listening product is based on the size of the customer database. Starting price can be as a low as several thousand dollars per month. The system is usually sold on a Software-as-a-Service (SaaS) basis, but on-premise licenses are also available.


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* For extra credit, compare and contrast Provenir’s primary Web site  with the site for their listening division.

** Defined in Wikipedia as “mathematical structures used to model pairwise relations between objects”.

*** Would it be even cooler to call them grafs or, better still, grafz?

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ClickDimensions Grows Quickly by Offering B2B Marketing Automation as a Microsoft Dynamics CRM Add-On

When I first wrote about ClickDimensions in a February, 2011 post, the concept was intriguing – a marketing automation add-on to Microsoft Dynamics CRM – but the product itself had been available for less than six months and claimed barely 50 clients. Since then, the company has grown its customer base more than ten-fold (it won’t release specific figures), won the Dynamics Marketplace Solution Excellence Partner of the Year award, signed up more than 250 channel partners around the world, and attracted outside funding. Sounds like the idea has legs.

The product has matured as well. The most important addition is a flow builder that supports branching campaigns. This is a bit limited – each node can only have yes/no branches – but it includes a reasonable set of actions including send an email, wait, notify user, add or remove from list, and run CRM workflow. It can also check for whether a contact has opened an email or clicked on a link. This is comparable to standard marketing automation products.

Other enhancements include an expanded survey builder that can skip questions or pages based on previous answers; a/b testing (two splits only) within emails; subscription management; and improved builders for email, landing pages, and forms. The system already provided dynamic email content, although users have to write the selection rules in a scripting language – something many marketers will find intimidating. Web behavior tracking, lead scoring, and social discovery (searching for and importing public data on LinkedIn) are also available.

None of this would make ClickDimensions stand out from other marketing automation systems if it weren’t for its fundamentally different architecture. ClickDimensions works directly from the Dynamics CRM data files, rather than creating a parallel, synchronized database like most marketing automation products. Additional tables needed by ClickDimensions are also custom objects within the Dynamics system. The result is direct connection between the two systems. ClickDimensions functions are also accessed within the Dynamics interface.

ClickDimensions isn’t the only vendor to take this approach. CoreMotives (purchased last March by Silverpop) has a similar architecture within the Microsoft Dynamics world and Predictive Response (which I haven’t looked at in detail) is a similar add-on to Salesforce.com. Still, as the shortness of this list suggests, the dominant approach to marketing automation remains separate, synchronized data files.

This could well change: as marketing automation becomes more widely understood, it will be purchased by less sophisticated companies. These buyers are already customers of CRM resellers who can easily offer ClickDimensions and similar CRM add-on products. That gives the add-on vendors efficient access to a huge market. The CRM vendors themselves would have the same advantage should they choose to add marketing automation  features. 

In practice, most buyers neither know nor care about the architectural differences between the two approaches. So long as the add-on architecture will work – and there’s no reason to doubt it does for all but the very largest implementations – success may well be determined by who reaches the most buyers first. As ClickDimensions’ fast growth already suggests, its reseller-based approach could be a decisive advantage as the marketing automation industry enters its next stage.  Only time will tell.

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SAS Unveils High Performance Analytics Technology

I spent the early part of this week at SAS’s annual analysts conference, where the company reviewed the past year and presented its vision for 2012. The story this year was simple: “big data”, and SAS’s “high performance analytics” approach to taming it.

Of course, “high performance analytics” is what SAS has always done and, like “big data” itself, the term is relative. What SAS specifically presented was a re-engineering of its core analytical procedures to run in “shared nothing” multi-processor environments.  Each data set is split into pieces that are loaded into separate units, processed independently and simultaneously, and then brought together for a result. SAS cited tremendous performance improvements, such as reducing the time to build a loan default model on a billion rows of records from 11 hours to 50 seconds. This obviously makes possible new, tactical applications.

The high performance architecture is becoming available in stages as each SAS procedure is rewritten to support it.  The change from a customer perspective is purposely minimal: existing SAS procedure calls are simply modified by adding a "HP" prefix.  This will make it easy for clients to take advantage of the new capabilities. 

The company revealed a just a few new products at the conference, most notably a Visual Analytics tool that uses in-memory processing to render billion-row data sets in seconds. But the real benefit of high performance will come less from new products than from using it with existing SAS procedures and tools. The SAS product that may benefit most of all is SAS Decision Management, which creates rule-based decision flows that can call on scoring models and other analytics to help guide tactical processes. The product itself isn’t new, but high-performance analytics will let it do new things.

SAS’s “big data” story also included Hadoop integration and expanded cloud deployments. By the end of March (if I understood the roadmap correctly), SAS will be able to read from and write to Hadoop data sets, embed Hadoop commands within SAS scripts, and send SAS metadata to Hadoop. Over the coming year, it will support cloud deployments through a variety of enhancements related to virtualization, open APIs, and eventually an app marketplace. The cloud-based initiatives also support SAS’s own on-demand business, which grew 57% last year to reach more than $100 million.

These are all positive developments for SAS, which must certainly support "big data" to remain relevant.  The new capabilities will also create some business changes as SAS competes more directly with companies like IBM and Oracle to embed analytics within operational processes. SAS itself noted the company is now more involved in architectural discussions of how its systems interact with the rest of the enterprise infrastructure. Other issues may include educating non-technical users and providing technology to protect privacy.  SAS leaders seem to think they can leave those issues to others, but I’m not so sure.

The conference produced little news directly related to marketing systems.  The company reports 38% growth in marketing applications – which it reports under the label of “customer intelligence” – so that is clearly a healthy business.  But the product road maps showed just incremental improvements of existing products, without any major new offerings. Again, high-performance analytics will make new things possible without other changes in the products themselves. The high performance version of marketing optimization is due by the end of the year.

If you want more evidence of how little attention was paid to marketing systems: SAS's biggest recent piece of marketing-related news, last week’s acquisition of online ad server aiMatch, got exactly one mention during the day-long presentation and was positioned as simply filling a small gap in the marketing product line. The company did announce, very casually, that aiMatch would be extended to include ad buying optimization as well as its current ad-selling optimization. That struck me as a pretty big deal, since ad buying is the heart of an already-huge industry that’s clearly the future of marketing. Then again, it’s also an intensely competitive, heavily-funded space that’s crawling with advanced technologies. Although SAS's high performance analytics could have a huge impact on ad serving, that won't happen unless SAS makes a major commitment of people and money.  We’ll see whether they make one.

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SAS Acquires AssetLink: Great for Enterprises, But What About the Rest of Us?

Summary: SAS's purchase of AssetLink ensures it's a viable alternative to IBM/Unica and Teradata/Aprimo for integrated marketing management. The real question is whether mid-size firms will be able to afford those systems.

SAS today announced its acquisition of marketing resource management vendor AssetLink. The move makes perfect sense: the other big MRM vendor was Aprimo, and once they were acquired by Teradata, SAS and AssetLink had no alternative partners in the enterprise marketing space.

Let me make clear that when I say “enterprise”, I mean “enterprise”, as in big business. Our friends at Gartner have recently proposed replacing “enterprise marketing management” with “integrated marketing management” as the general term for, um, integrated marketing management. Makes sense. But AssetLink told me their 50+ clients are all big companies. SAS’s marketing systems are also sold mostly to big firms. So we’re really talking about the “enterprise” market here. Once you starting considering mid-size businesses, there are other players, most notably MarketingPilot for MRM and Alterian and Neolane for business-to-consumer marketing automation.

Naturally, SAS and AssetLink don’t intend to limit themselves to enterprise buyers. Like IBM/Unica and Teradata/Aprimo, they hope to sell integrated marketing systems to mid-size firms too. This may be easier for the other two vendors: IBM and Unica certainly have more mid-size marketing clients than SAS and AssetLink, and although Teradata is mostly a big-company vendor, Aprimo has a broader client mix and a relatively new “Marketing Studio On Demand” product that was designed for smaller buyers. Still, we can expect SAS to try.

I'll admit to being skeptical that enterprise-oriented firms like IBM, Teradata, and SAS can successfully sell their products for the mid-market. The transition faces some technical roadblocks, mostly about hiding complexity and reducing the need for customization. But those can be solved. The larger challenges are rooted in corporate culture and require changes in areas like pricing and sales compensation. To put it more bluntly, enterprise firms like to sell big deals.

In fact, I think big deals are exactly what have attracted IBM, Teradata, and SAS to focus on marketing systems. They all seem to have adopted the grand vision of integrated marketing automation as a centrally-managed, analytically-driven process to coordinate customer contacts across all touchpoints. This requires integrating the marketing system with sales, customer service and Web systems. While I also love that vision, I suspect that only a few large firms will have the resources to implement it. This could mean that, in practice, integrated marketing management is limited to enterprise buyers.

This leads to another question: What are Oracle and SAP up to? They’re the other big enterprise software vendors and they’re surely interested in offering integrated marketing automation to their own clients, both to increase revenue and to block account penetration by competitors. Both vendors do have some marketing automation products but these don’t have much of a public presence. If integrated marketing automation really takes off at enterprise accounts, I suspect we’ll see Oracle and SAP pay more attention to this market, either through acquisition or enhancement of existing products.

You’ll notice I haven’t said much here about the SAS/AssetLink deal itself. That’s not due to any lack of enthusiasm: it’s just that the pairing was so obvious that it doesn’t require much explanation. It ensures that SAS’s marketing automation suite remains a viable alternative to IBM and Teradata, by giving it the scope that those other vendors possess. Of course, there are still substantial differences among the products, so buyers who are free to choose any of them will need to dig into the details and match them against their requirements. But I suspect that many companies will have a strong predisposition towards one vendor or another, depending on what other systems they have in place. In that case, there may be fewer truly competitive deals than we saw in the past, when marketing could choose its system without the rest of the company really caring all that much.

My bottom line, then, is that this deal doesn’t reshape the market, but it does clarify its structure and ensure that SAS continues to compete. My real concern is whether mid-size companies will be able to participate or integrated marketing automation will remain the preserve of enterprise marketers.

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Don't Fix Your Marketing Process

Summary: In a constantly changing world, flexibility is more important than optimization. Marketers need people, processes and technology that allow them to react quickly to new opportunities.

The always-insightful Adam Needles is running a series of blog posts this week that summarize the “real state” of B2B demand generation. So far, his main points have been that the role of B2B marketing has expanded to cover the entire buying cycle from initial lead generation through closed deals and that new technology must be accompanied by changes in people, process and content to have an impact. Tomorrow’s post will apparently discuss the need to tie marketing efforts to revenue.

This is good stuff and well articulated, but industry gurus have been making similar points for a long time. The real question is what to do about it. HOW can marketers adjust their staffing and processes, given the practical constraints of time and budget? And can systems provide specific capabilities that will make the adjustment easier?

The conventional wisdom is that marketers need to become more efficient, more attuned to individual buyers’ movement through the purchase cycle, and better coordinated with sales departments. But although these are certainly valid goals, I think they understate the problem.

Specifically, they make an implicit assumption that marketers are facing a stable situation. This is what allows them to design a new set of processes and techniques optimized for that situation.
I’d argue that the situation is highly unstable. Marketers face continued rapid change in the methods and media they have available. In this situation, any optimized process will rapidly become obsolete. So, the key requirement is flexibility itself. The most successful organizations will be those whose people, processes and technology can most effectively exploit new opportunities as they appear.

(The classic example of the conflict between stability and flexibility is the competition between Ford and General Motors in the 1920’s. Henry Ford relentlessly, even obsessively, optimized his company to make Model T’s more efficiently. But even though Ford kept driving down his costs, he ultimately lost to a General Motors that was able to change its products more quickly. Just thought I’d throw that in there.)

What does an organization optimized for flexibility look like? I think it keeps its processes simple, so they can be easily adjusted. This may mean they’re broken down into many small, connected processes that can be changed individually without affecting the other processes around them. (“Modular” and “loosely coupled” are better terms for this but sound too geeky.)

It certainly means that results are measured closely and frequently, so successes and failures are identified quickly and exploited or discarded as appropriate. It also means the organization makes experimentation easy, in terms of funding, staff time and tolerance for mistakes. It probably suggests that staff members should be more generalists than specialists, which implies greater willingness to pay for training and perhaps wider use of outside resources to provide particular skills on demand.

From a technology standpoint, flexibility implies ease of integration with new data sources, marketing methods and external systems. That’s very different from one vendor trying to include as many functions as possible. (On the other hand, multi-function suites always do seem to win in the market, precisely because they require less integration. Perhaps this will change if integration itself becomes easy enough.)

Flexibility also implies greater ease of use, particularly in terms of setting up and modifying marketing programs and processes. The need for many small, loosely connected processes has some specific implications for interface design. The need for measurement also implies better reporting technologies – a topic that several marketing automation vendors have recently begun to address.

Circling back for a moment to staff skills, all this integration, process coupling and analysis seems to mean that those "generalists" are going to be more technically adept than today's marketers, even if they are not as specialized in terms of the particular media. I'd like to believe that really great technology and interfaces can reduce the level of technical skill required, but suspect that won't happen any time soon.

I’ll admit these are somewhat half-baked notions, since they were largely triggered by Adam’s posts this week. On the other hand, I’ve been thinking for quite some time that we need to move beyond just telling marketers to nail down their processes. Perhaps a recognition that we must manage in a period of continuous change is a good next step.

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Adobe Buys Omniture: Good for Marketers, Bad for Marketing Automation Vendors

Summary: Adobe's agreement to purchase Omniture illustrates the on-going convergence of Web content management and Web analytics systems. This puts pressure on marketing automation vendors, who also want to provide Web analytics and content management, and who are already being pressed by customer relationship management (CRM) vendors. That's a pretty unpleasant position.

Adobe's announcement that it will purchase Omniture for $1.8 billion makes perfect sense. As I discussed in July, marketers have a lot to gain from tight integration between a Web content management system (CMS) like Adobe's Dreamweaver and Web analytics and optimization like Omniture.

Let's take it as a given, then, that major Web content management systems will soon include integrated analytics. This sets up a new clash between marketing automation vendors and Web CMS vendors. One of Omniture's major selling points before the merger was its ability to combine information across all online marketing channels, and I think they were working towards adding offline channels as well. Although short-term priorities will probably shift now towards Adobe integration, I doubt their long-term ambitions in that direction will evaporate.

And even if the CMS vendors do restrict their focus to online, they will still be competing with Web CMS and analytics solutions from marketing automation vendors who realize that online is too big a sector for them to ignore. Even though both sets of vendors will need to provide some degree of openness so their clients can move data from one platform to another, both will really want to sell their clients the entire execution and analysis stack, and will tightly integrate them to encourage this.

I think I've made this point before, but I'll repeat it again: the marketing automation vendors are really being squeezed between the Web vendors on one side, and the CRM vendors on the other. This is a very unpleasant position, since both CMS and CRM vendors are much larger than the marketing automation specialists. It's hard to see how they can survive as anything but niche products in the not-too-distance future.

This position probably puts me at odds with industry analysts who see great opportunities for growth in the marketing automation space. (I'd point to specific examples but can't find any just this minute.) The general argument seems to be that low adoption rates mean there's plenty of unmet need that will eventually lead to sales. I agree that adoption is low -- but there's no guarantee that the marketing automation specialists will be the ones who fill the gap. Improved CRM or CMS offerings might actually meet marketers needs. And if since nearly everyone has or needs a CRM and CMS system, it will actually be easier for companies to use the expanded features in their existing systems than to buy a separate marketing automation product.

If anybody has a good counter argument, I'd be happy to hear it.

Two further thoughts:

- When I asked one of the marketing automation vendors recently whether he considered CMS vendors as competitors, he said he didn't because CMS vendors still sell primarily to IT, while marketing automation is purchased by marketing. Assuming this is true, then Omniture also helps Adobe by giving access to marketing departments.

- The acquisition may make marketing automation vendors more attractive acquisition candidates for CMS vendors wishing to beef up their marketing capabilities. Autonomy (Interwoven), Open Text, and EMC (Documentum) could all swallow a Unica, Aprimo or Alterian without stopping to chew.

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